What’s Obama thinking with tax hikes on the rich?

Thanksgiving is over, and the fiscal cliff is back on the table. Here in Georgia, Sen. Saxby Chambliss’s public feud with tax-pledge champion Grover Norquist made headlines and ramped up speculation about which Georgia Republican(s) might challenge our senior senator when he’s up for re-election in 2014.

But if there’s going to be a deal on taxes and spending before we start going over the cliff in January, our newly re-elected president will play the most prominent role. I’ve previously written about how the GOP-led House might try to maneuver with Obama. Now Greg Mankiw, a Harvard economist and former adviser to both George W. Bush and Mitt Romney, uses an op-ed in the New York Times to imagine how the president’s internal debate might be going from two perspectives: the committed liberal his critics contend he is, and the pragmatic moderate his supporters believe him to be.

The entire article is interesting and worth a read, but I’m going to highlight one section that isn’t getting much attention in the discussion of how taxes might be reformed:

MOD: According to the Tax Policy Center, if we cap itemized deductions at $50,000 and keep tax rates as they are today, we’d raise $749 billion in tax revenue over 10 years. And 96.2 percent of the extra revenue would come from the top fifth of taxpayers, with 79.9 percent from the top 1 percent.

LIB: I have a couple of concerns about that.

MOD: What?

LIB: First, if you limit deductions, people in high-tax states will be hit particularly hard, because state and local taxes are deductible.

MOD: Isn’t that fair? I don’t see why states and towns that choose to have very high taxes should be subsidized by everyone else.

LIB: These states generally have liberal agendas, which I want to encourage, not penalize. And many of them, like New York and California, vote Democratic. After they helped us win such a great victory, I don’t think we should be asking our allies to bear a disproportionate share of the burden. (Emphases and links original.)

Some context: In February, the Congressional Budget Office estimated that the deduction for state and local taxes represents about 0.3 percent of gross domestic product per year. Only four deductions were larger. In a $16 trillion-a-year economy, 0.3 percent equals $48 billion.

– By Kyle Wingfield

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271 comments Add your comment

Hillbilly D

November 26th, 2012
12:24 pm

In my opinion, they’ll come up with some kind of “feel good compromise”, so they can kick the can to the new Congress. Then there will be much hand wringing and teeth gnashing until they come up with another “compromise”, likely based on all too rosy economic projections (and have little or no basis in reality) that will stall things until the mid term election cycle starts. I think we’ll just keep sailing along as a rudderless ship. Sooner or later, we’ll run aground but to paraphrase Scarlett O’Hara, “they can’t think about that right now. … they’ll think about that tomorrow. …..”.

Lil' Barry Bailout - OBAMAPHONE!!!

November 26th, 2012
12:28 pm

Return spending to pre-Obozo levels before asking the productive for more tax revenue by any means.

Lil' Barry Bailout - OBAMAPHONE!!!

November 26th, 2012
12:31 pm

Hillbilly D is correct.

Therefore, the fiscal cliff would be preferable to what we’re likely to get.

PROUD NAVY VET

November 26th, 2012
12:34 pm

I don’t understand. People who are nmot in that tax bracket do everything in their power to protect the rich. They have so many shelters that you and me will not be able to take advantage of. They have gotten a break for decades, they need to pay their FAIR share. small business should be exempt form the majority of tax increases, but personal taxes should be increased. Y’all know it’s not right. Grover is as good as dead. The Right knows taxes need to be increased.

JDW

November 26th, 2012
12:37 pm

Interesting thought but easily overcome…just exclude state and local taxes from the calculation and make the limit say $25,000. I would love to see a combination of raising tax rates to Clinton era levels, upping Capital Gains to 25% or so, eliminating carried interest and a deduction limit. Combine that with the current rates of spending increase plus a tweak or two to SS and Medicare eligibility and indexing and we will be back to pre-Duhbya levels in 5 to 8 years.

guest

November 26th, 2012
12:37 pm

Proud Navy Vet,

Please define their “fair share.”

SBinF

November 26th, 2012
12:46 pm

“Please define their “fair share.””

When the likes of Rmoney pay a lesser effective rate than me, I’d call that unfair.

BenDaho

November 26th, 2012
12:50 pm

All of this hand-wringing over 74.9 billion per year?? Really? Fork over more tax money and watch them pi$$ it away like they always do. We fall for the same cr@p over and over. Throw them all out with a tar and feathering!

guest

November 26th, 2012
12:51 pm

Typical libs…you guys whine like hell about someone paying their fair share, but can’t define it. I think it’s unfair that Romney’s house is bigger than mine. I think it’s unfair that Obama has a basketball court in his back yard, etc.

JamVet

November 26th, 2012
12:53 pm

Mod??????

The GOP is the anti-moderate party.

Compromise, statesmanship and moderation – these are swear words to our Republican extremists.

And I suspect that it is going to take another couple of election day humiliations – like the recent third one in the past four elections – before they change their immoderate ways…

Jefferson

November 26th, 2012
12:57 pm

Fair share of taxes come with fair share of income, if you are getting more than you deserve you pay more. Figure it out.

Hopeful

November 26th, 2012
12:59 pm

If he dose hit the rich he needs to hit himself as well and the congress they need to be hit ! And take some of that money and used it in the United States improved our Employment! Don’t beat the man that opens the business down beat all those rich Politicians down with pockets filled with money lets help people who are open bussiness and giving jobs ok ! Lets help people who want to work that’s willing to even shoved cow poop no job is down grading be a worker bee not a lazy bee! Our country just gives money away let people earn it !

JamVet

November 26th, 2012
12:59 pm

guest, fair share?

Simple, Mitt Romney and the other 1%ers need to be paying a much higher effective tax rate than you and me. On their MUCH greater wealth.

No more hiding money overseas, no more endless tax loopholes, dodges and shelters, available ONLY to the wealthy.

You sure as hell are not getting ANY of them.

Nor should they.

It is very simple in a non-plutocracy – heavily tax wealth instead of heavily taxing labor like we do now.

Trickle down is destructive and stupid…

SBinF

November 26th, 2012
1:00 pm

“Typical libs…you guys whine like hell about someone paying their fair share, but can’t define it. I think it’s unfair that Romney’s house is bigger than mine. I think it’s unfair that Obama has a basketball court in his back yard, etc.”

As far as I know, Romney’s house nor Obama’s BBall court were the result of favorable conditions by the federal government.

Your logic has more holes than Swiss cheese.

CC

November 26th, 2012
1:02 pm

“Compromise, statesmanship and moderation – these are swear words to our Republican extremists.”

Those are words totally alien to the democrat party.

guest

November 26th, 2012
1:04 pm

SBinF, obviously you didn’t get that I was using stupid examples. You guys are still not defining fair share. All I see is this oh, crap, they make more therefore they should pay more. Give me numbers of what their fair share is. If not, then STFU.

SBinF

November 26th, 2012
1:07 pm

“SBinF, obviously you didn’t get that I was using stupid examples. You guys are still not defining fair share. All I see is this oh, crap, they make more therefore they should pay more. Give me numbers of what their fair share is. If not, then STFU.”

You only admit your examples are stupid after I point out why they are stupid. Keep trying though, perhaps you’ll make a valid point soon.

I never said anyone should pay more, I simply highlight the fact that Romney pays a lower effective rate than many middle class people. At the very least, he should pay the same percentage of his income to the federal government than i do.

jconservative

November 26th, 2012
1:11 pm

Why are people in Washington, DC acting like there is a crisis? What fiscal cliff? There are two bills duly passed by the people’s representatives, and signed by the people’s president, going into effect January 2013. Why is that a crisis?

The 12/31/2012 sunset on the Bush/Obama Tax Cuts was passed by Congress in December 2010 and signed by the President. The bill passed the House with 139 Dems and 138 Reps voting “Yes”.
It is hard to get more bi-partisan than that.

The Sequestration (spending cuts everywhere!) that goes into effect 1/2/2013 passed Congress and was signed by the President. 174 Republicans and 95 Democrats voted for it in the House. OK, so the Republicans get most of the credit on this bill. So what?

We have what our duly elected representatives voted into law. Spending is being cut and revenue is being increased. Both sides have what they want. The deficit will go down. The first then you know there will be a “Surplus” and the next president can send every taxpayer a check. What is the problem? This is why we keep sending incumbents back to congress year after year. To resolve problems.

Everyone relax! The Dawgs will Roll the Tide Saturday and all in Dawgieville will be happy.

yuzeyurbrane

November 26th, 2012
1:12 pm

Kyle, your article illustrates some of the ideas that are worthy of discussion. While, as you have probably discerned, I am no big fan of Saxby or Graham, I applaud their pragmatic and patriotic approach to compromise. I even think a majority of Georgians would approve. However, I don’t know if it will sell to the voters in a Georgia Republican Primary election.

guest

November 26th, 2012
1:13 pm

SBinF,

Dude, seriously? You couldn’t tell my examples were intentionally stupid. Good grief. No wonder this country is going to hell.

So, are you saying everyone should pay, what is it, 14% of their income to the feds?

JamVet

November 26th, 2012
1:14 pm

Keep telling yourself that, cc.

How many more electoral beat downs will it take before you right wing reactionaries and hyper-extremists start singing a moderate song of compromise?

Because apparently three out of the last four ain’t enough!

And apparently the demented Grover Norquist still leads your band…

The Dawgs will Roll the Tide Saturday…

Yep, and Romney in a landslide!

carlosgvv

November 26th, 2012
1:16 pm

Obama wants them taxed at the level when Bill Clinton was President.

It’s really not that hard to understand.

SBinF

November 26th, 2012
1:16 pm

“Dude, seriously? You couldn’t tell my examples were intentionally stupid. Good grief. No wonder this country is going to hell.

So, are you saying everyone should pay, what is it, 14% of their income to the feds?”

Rmoney should be paying rates like I do. The tax code has changed in the last generation to tax labor instead of wealth. Far more of us labor than are wealthy, so it doesn’t seem to make much sense. The huge debt and deficit were created in large part because of the Bush tax cuts. Let them expire, then go from there.

Real Athens

November 26th, 2012
1:22 pm

Based on research by the Tax Policy Center, tax deferrals and deductions and other forms of tax expenditures (tax subsidies from special deductions, exemptions, exclusions, credits, capital gains, and loopholes), which largely benefit the rich, are worth about 7.4% of the GDP, or about $1.1 trillion.

Other sources have estimated that about two-thirds of the annual $850 billion in tax expenditures goes to the top quintile of taxpayers.

Don't Tread

November 26th, 2012
1:22 pm

What’s Obama thinking with tax hikes on the rich?

Same thing he’s always thought…the rich are the ‘enemy’ and deserve to be ‘punished’. (Then he can ‘reward’ his supporters with the money taken from ‘the enemy’.)

SBinF

November 26th, 2012
1:26 pm

Oh yeah, keep up the “makers” vs. “takers” argument, Don’t Tread. It worked so well for you all a few weeks ago. How does it go again? Anyone who supports Obama is a lazy moocher who wants handouts. Yes, that went over so well.

The delicious cosmic irony, Mitt won 47% of the vote.

Auntie Christ

November 26th, 2012
1:28 pm

I just love it when a con presumes to speak for the liberals,and how in the process they totally turn facts on their head. The east and west coast urban centers are supposedly taxed higher according to mankiw and dutifully repeated by wingfield, (naturally since he never met a right wing distortion that wasn’t fit to print) because of their ‘liberal agendas.’ mankiw and wingfield blithely ignore facts that are hardly secret to a thinking person. East and West coast urban centers are the financial and commercial hubs of the nation and the costs (taxes) to provide the infrastructure to support these activities have nothing to do with a ‘liberal agenda,’ and in fact have everything to do with a conservative agenda, providing the means for millionaires to import, export, ship, and count the money arising from their businesses. When Bark, Ark or Hick Miss. become major financial and commercial centers on par with Boston, NY, SF, Seattle or LA, then they too will see higher tax rates with or without a ‘liberal agenda.’ What a pitiful attempt to dupe the gullible.

Auntie Christ

November 26th, 2012
1:34 pm

What’s Obama thinking with tax hikes on the rich?

The same reason people rob banks, that’s where the most money is.

Boomsheeka

November 26th, 2012
1:39 pm

“…the committed liberal his critics contend he is, and the pragmatic moderate his supporters believe him to be.”

I’m nowhere near a BHO fan but I’ve never perceived that he is the liberal zealot that the right would have us believe. I believe the guy’s making an effort to govern from the middle, much like Clinton did, and the R’s need to recognize and work with that.

td

November 26th, 2012
1:40 pm

SBinF

November 26th, 2012
12:46 pm

“Please define their “fair share.””

When the likes of Rmoney pay a lesser effective rate than me, I’d call that unfair.

Once you have your deduction then you “effective tax rate” is not above 15%. If it is then you are in the top 1% or really need to hire an accountant to do your taxes.

Interested Observer

November 26th, 2012
1:40 pm

RE: “According to the Tax Policy Center, if we cap itemized deductions at $50,000 and keep tax rates as they are today, we’d raise $749 billion in tax revenue over 10 years. And 96.2 percent of the extra revenue would come from the top fifth of taxpayers, with 79.9 percent from the top 1 percent.”

I can assure Kyle (and Greg Mankiw) that the debate described above is not a debate that President Obama is having with himself. Recall that he has promised to raise taxes on the top TWO percent of households and, simultaneously, not to raise taxes on anybody else. The proposal that Mankiw describes would raise taxes on people that were to be shielded from such tax increases.

In other words, rather than raising some from the middle class and 96.2 percent from the top five percent, President Obama promised to raise 100 percent of revenues from the top two percent by allowing the top rates to expire (this would raise approximately $800 billion over ten years). Democrats everywhere ran on that, it’s fair, and there’s no reason to back off of it.

If Republicans refuse to extend the tax cuts for the middle class in order to hold tax cuts for the rich hostage, then people should hold them accountable in 2014.

Kyle Wingfield

November 26th, 2012
1:47 pm

Interested @ 1:40: Obama broke that pledge a long time ago. Or do you think “the rich” are the ones who will be paying the “tax” that is due when one fails to meet the individual mandate?

PROUD NAVY VET

November 26th, 2012
1:52 pm

Fair share=the same rate we pay.

PROUD NAVY VET

November 26th, 2012
1:54 pm

Look to all of the folks on the Right. Your Senaters & Congressman are ready to do what’s needed. I think the people in DC have more info then we do, (even if they don’t always act it). They know taxes need to raised. Some of y’all been listening to rush and FOX news to long.

Jefferson

November 26th, 2012
1:56 pm

Rates and rates on cap gains need to return to historical successful rates, they can carry their own water and will be fine butt kissers.

Kyle Wingfield

November 26th, 2012
1:57 pm

Auntie @ 1:28: If all these urban centers, which all happen to vote overwhelmingly for liberals, are all running up these costs (and the taxes to pay for them) for the reasons you suggest, why do you insist on calling it a “conservative agenda”? Why are all these liberals enacting this conservative agenda? Are they “gullible” folks who have been “duped”??

Scrivener

November 26th, 2012
2:00 pm

A recent poll revealed that most people believe the lie that high income taxpayers pay a lower tax rate than low and middle income taxpayers. Is our electorate now so dumb that they don’t understand the difference between ordinary income and capital gains and the reason they’re taxed differently? I guess not. Plus it feeds their desperate need to hate people wealthier than they are: Here’s one link:
http://usgovinfo.about.com/od/incometaxandtheirs/a/taxtrump.htm

md

November 26th, 2012
2:02 pm

Fair Share?

And once again those on the left discount all choices in their little scenario……..

Citizen A CHOOSES to drop out of school (already paid by the taxpayers) and proceeds to make 20k a year……his fair share according to the left is $0…….

Citizen B CHOOSES to get a graduate degree, incur the cost of same, and gets a job making 300k…….his fair share? As freakin much as the guy that chose to pay the $0 can get from him…….

And folks wonder why we are circling the drain…….

SBinF

November 26th, 2012
2:04 pm

“Once you have your deduction then you “effective tax rate” is not above 15%. If it is then you are in the top 1% or really need to hire an accountant to do your taxes.”

Have you seen my W-2’s? Of course not. As a middle class, single, childless renter, I surely get the least benefit from tax deductions as anyone in the country.

John

November 26th, 2012
2:08 pm

Fair share does not mean anything, rich already pay a lot more. I think this “fair share” desire comes from simple jealousy and horrid economy. Middle class is collapsing and Dems have a convinient boogie man handy (the rich, who are curiously defined as $250k+ which is NOT rich). They already pay same exact rate as all of us if not more, the 15% tax rate that Romney paid comes from capital gains taxes not income tax. Since tax laws are too complex for simpletons to understand they fall for the “oh he is paying less than me” ruse. Face it, Obama won on the back of jealous simpletons whom he rewarded with handouts at taxpayer expense and now wants the rich to foot his reelection bill. What a joke

SBinF

November 26th, 2012
2:10 pm

“They already pay same exact rate as all of us if not more, the 15% tax rate that Romney paid comes from capital gains taxes not income tax.”

This is precisely what’s wrong with the tax code. I’m hardly a simpleton, but I’m confused as to why capital gains are considered less income than income derived from labor. And yes, the tax code is complicated so that folks like Romney can get away with paying less than the rest of us, you know, because it’s legal!

John

November 26th, 2012
2:10 pm

SBinF, if you had investments and gains then you would be paying the same 15% rate as “the rich”…isnt that fair?

PROUD NAVY VET

November 26th, 2012
2:11 pm

It’s amazing how thr Republicans turned so bitterly on romney with in 12 hours after the election.

Interested Observer

November 26th, 2012
2:11 pm

Kyle @1:47: Apples and oranges. The “tax” that you’re referring to is entirely voluntary.

John

November 26th, 2012
2:12 pm

That is to encourage investments and dont forget your 401k would be taxed at 30% as well instead of current 15%. Do we want everyone to have a 15% tax hike on their retirement income?

John

November 26th, 2012
2:14 pm

NAVY VET, first of all tons of respect for you service to US. I am not surprised that GOP turned on Romney, frankly if he could not win with economy in shambles and complete incompetent in the WH then he deserved to lose.

SBinF

November 26th, 2012
2:15 pm

“SBinF, if you had investments and gains then you would be paying the same 15% rate as “the rich”…isnt that fair?”

And what percentage of people derive most of their income from investments versus those who derive most income from labor?

Your argument is completely fallacious, and you are (correct use of the term) begging the question. Income is taxed at X, capital gains are taxed at Y. It is the same rate for everyone. Well yes, but if 95% of people get their income from labor and 5% of people get their income from capital gains, the picture of fairness becomes a bit hazy.

td

November 26th, 2012
2:17 pm

SBinF

November 26th, 2012
2:04 pm

“Once you have your deduction then you “effective tax rate” is not above 15%. If it is then you are in the top 1% or really need to hire an accountant to do your taxes.”

Have you seen my W-2’s? Of course not. As a middle class, single, childless renter, I surely get the least benefit from tax deductions as anyone in the country.

As a single, middleclass, childless renter you are not doing the right things to keep your taxes down to what the normal tax rates should be for a person with your income thus you are not doing what the people believe is in the best interest of the nation as a whole.

Like I said you need to hire an accountant to show you how to reduce your tax burden. If you owned a home and had a child then you would not be paying more then Romney. Since you have no other expenses then you should have tons of money invested in the stock market so your gains are being taxed at the same rate as Romney’s and your income is being taxed at a lower rate then Romney’s income was taxed at.

td

November 26th, 2012
2:18 pm

SBinF

November 26th, 2012
2:15 pm

“SBinF, if you had investments and gains then you would be paying the same 15% rate as “the rich”…isnt that fair?”

And what percentage of people derive most of their income from investments versus those who derive most income from labor?

Everyone that is retired and is living off their 401K and SS. Just like Romney is retired.

Centrist

November 26th, 2012
2:19 pm

The definition of “rich” is the problem. Is it Obama’s $200K individual/$250K per family of dual income professionals and small businesses already paying the highest marginal, progressive tax rates? Or is it Warren Buffet’s top who earn over a millionaire/billion per year taxed at lower capital gain rates.

Not enough making over a $ million/ year – 300,000, and half that make over 2 $ million/ year. The soak even more mentality of professional families including doctors, dentists, lawyers, scientists, engineers, architects, accountants, and high level administrators, etc. is sheer stupidity – and is not likely to happen.